Kenya

Taxable period

A company has discretion to determine its financial year-end, provided it is a 12-month period. However, any changes in this must be approved by the Commissioner of the KRA.

Tax returns

Resident companies and PEs of non-resident companies must file a self-assessment tax return annually. The return is accompanied by a tax computation and financial statements, amongst other schedules. The return is due within six months following a company’s financial year-end.

Payment of tax

Instalment tax payments must be made during the year based on the lower of 110% of the previous year’s liability or an estimate of the current year’s liability. Instalment tax payments are due on the 20th day of the fourth, sixth, ninth, and twelfth month of a company’s financial year. 

Agricultural companies are required to pay estimated tax in two instalments of 75% and 25% during the year. Any balance of tax at the end of the year must be paid within four months of the financial year-end.

Payment of agency taxes

The tax withheld from payments must be paid by the 20th day of the month following the month in which the deduction is made.

Tax Procedures Act (TPA)

The TPA, which entered into force on 19 January 2016, aims to provide uniform procedures for consistency and efficiency in the administration of tax laws, facilitate tax compliance by taxpayers, and promote the effective and efficient collection of tax.

The TPA also harmonises and consolidates tax procedural rules. For example, the TPA provides that a taxpayer should keep records for five years. Previously, the different tax laws, such as the VAT Act 2013, Income Tax Act, and Excise Act, prescribed different timeframes that records should be kept by a taxpayer. Given that it is a relatively new piece of tax legislation, there are some inconsistencies when you mirror the TPA and other tax legislation, though we expect these inconsistencies to be addressed with time.

The Finance Act, 2023 introduced section 23A, which grants the Commissioner the authority to establish an electronic tax system for issuing tax invoices and recording stocks. Once implemented, all business enterprises, including residents and PEs of non-resident persons, will be required to use the electronic system to issue invoices and maintain records of their stocks.

The Tax Procedures (Amendment) Act, 2024 extended the tax amnesty initiative which refrains the Commissioner from recovering penalties, interest, or fines on tax debt if the principal tax is paid by 31 December 2023. The amnesty shall be on interest, penalties, or fines on the unpaid tax that have accrued up to the 31 December 2023. Taxpayers who have not paid the principal tax by this date can apply for amnesty on interest, penalties, or fines, provided they propose a payment plan and meet specific conditions by 30 June 2025.

The Tax Procedures (Amendment) Act, 2024 introduced section 37F, which allows the Commissioner, with written approval from the Cabinet Secretary, to refrain from recovering unpaid taxes under specific conditions. These conditions include impossibility of recovery, public interest, undue difficulty or expense, hardship, or other reasons. Additionally, the Commissioner is required to publish a notice in the Gazette every four months, listing the taxpayers and the reasons for tax abandonment. 

The Finance Act, 2025 amended WHT penalties, providing that a withholding agent will not be liable for the principal tax not withheld if the recipient of the payment has already paid and accounted for the full tax due. 

The Finance Act, 2025 also amended agency notices to non-residents. This expands the Commissioner’s powers to issue agency notices to non-resident persons who are subject to tax in Kenya. 

The Finance Act, 2025 also introduced section 44A on certificate of origin. This introduces a requirement for a certificate of origin for all goods imported into Kenya and specifies what it must include. 

The Act further has an amendment that extends the time within which the Commissioner must determine a refund application from 90 to 120 days, and from 120 to 180 days where the application is subject to audit. 

Lastly, the Act has amended that empowers the Cabinet Secretary to waive penalties and interest arising from errors, delays, or malfunctions in the KRA’s electronic systems, or from incorrect registration of tax obligations. 

The Finance Act, 2026 introduced further changes to the Tax Procedures Act, including the following: 

• The Finance Act, 2026 extended the amnesty framework by shifting the cut-off date for qualifying tax debt from 31 December 2023 to 31 December 2025 and extending the deadline for settlement of outstanding principal tax from 30 June 2025 to 31 December 2026. 

• Introduction of a general anti-avoidance rule under section 18A, empowering the Commissioner to disregard arrangements entered into primarily to obtain a tax benefit, subject to the Commissioner providing written reasons within thirty days. 

• Introduction of section 29A, empowering the Commissioner to originate an assessment based on available information, subject to a request for additional information at least thirty days before issuing the assessment and the taxpayer’s right of objection. 

• Formal introduction of pre-populated tax returns under section 75, which the Commissioner must issue by the end of January, and which taxpayers may review, confirm or amend within two months of issuance. 

• Introduction of information reporting obligations for virtual asset service providers (section 6C) and a framework for the automatic exchange of information on virtual asset transactions with other jurisdictions (section 6D). 

• Introduction of section 23B, requiring importers to obtain and retain export declarations or equivalent customs documents for imported goods for at least five years and to produce them on request. 

• Introduction of section 39B, empowering the Commissioner to recover unpaid fees, levies or charges imposed under other laws using the enforcement mechanisms applicable to unpaid taxes. 

• Revision of the penalty for failure to comply with electronic tax system requirements to the higher of 5% of the tax due, KES 100,000 for companies, or KES 10,000 for individuals. 

The Tax Appeal Tribunal Act

The Tax Appeal Tribunal Act, which entered into operation on 1 April 2015, establishes one tribunal that will hear appeals for all tax areas. Previously, income tax matters would be heard by the Local Committee whereas VAT matters would be heard by the Tax Tribunal.

Tax audit process

There is no prescribed audit process, as an audit can be triggered by various factors as determined by the KRA. Generally, tax audits should be carried out after every two to four years. The audit or inspection will commence with a request from the KRA for the taxpayer to make available any such records or information as may be required.

Statute of limitations

The tax authorities must issue an assessment before the expiry of five years from the date of filing the self-assessment by the taxpayer. The KRA may go back past five years where fraud is suspected. There is no time limit for completing tax audits. However, they are normally completed within a reasonable time, especially if there are no major disputes.

Topics of focus for tax authorities

The tax authorities are focused on detecting fraudulent behaviour and potential tax evasion by using risk-based approaches and by providing analytic capability and intelligence information to users for better decision making and revenue growth.